The Caspian Sea has long been known as home to the world's best
caviar. Ninety percent of the world's sturgeons (processed eggs
are caviar), live in the Caspian Sea area where they spawn in
rivers that feed it.1 For
centuries, the czars of Russia impressed their guests with caviar
piled high in silver buckets.2
Their communist successors went on to turn the delicacy into
a major luxury export commodity.

Sturgeon Fishermen on the Caspian.

Caviar used to be monopolized
by the Soviets and Iran, the only two countries that touched
the Caspian and which both cooperated to limit the supply of
caviar and thus protect its price and image. In 1962 the Soviet
caviar industry began exercising tight control by banning open
sea fishing. Later they introduced aggressive breeding practices.
An estimated 100 million sturgeon fry3used to be released;
of which Azerbaijan's fisheries contributed 5 million.4

Iran's caviar was, and still is, strictly controlled by the Shilat,
the state monopoly which controls the entire fishing industry
and oversees all activities related to the processing of caviar
including domestic and international sales.5

But now with the dissolution
of the Soviet Union, there are five countries that want to market
caviar. Besides Iran, there is Azerbaijan, Kazakhstan, Turkmen-istan,
Russia including its two Autonomous Repub-lics-Daghestan and
Kalm-ykia.

Naturally, each party wants to capitalize on caviar as much as
possible. There are two exceptions: Turkmenistan is still incapable
of any processing and Iran is still effectively managing its
caviar industry through the Shilat. Meanwhile, Daghestan and
Kalmykia are home to the two largest fisheries in the former
Soviet Union and have the potential of producing and exporting
disproportionate volumes of caviar to generate hard currency.6
Azerbaijan is hoping to produce 100 tons of caviar per year,
most of it for export.7 The
entire Soviet Union, on the other hand, used to limit its annual
caviar exports to 150 tons.8The temptations for war-ravaged Azerbaijan
to maximize income from caviar is understandable given that 70%
of the national budget has to go to the war and refugees.9

Top:
Beluga Sturgeon: Large
sized, can measure up to 4 meters in length and weighs up to
1000 Kg. Yields about 15% of its weight in caviar.Middle:Asetra Sturgeon: Medium sized, 2 meters long,
can weigh 200 Kg.Bottom:
Sevruga Sturgeon: Small
sized, max. 1.5 meters long, rarely weighs over 25 Kg.

New Distributors on
the Scene

Iran and the Soviet Union used
to channel their caviar to the West through a small clique of
foreign partners. Before Iran's revolution and the dissolution
of the Soviet Union, the best known western supplier of Soviet
caviar was Petrossian S.A. of Paris, a name still synonymous
with high-end packaged caviar.10Romanov was another
well-known brand distributed primarily in the United States.
While Petrossian held the monopoly in Europe, it competed with
Romanov in the US.

Iranian Caviar was distributed by George Fixon's Eaglet Corporation.
But the new political changes in both nations have resulted in
new players on the scene such as Caviar House, and the Swiss
company, Porimex, with its American arm, Caviar & Caviar.

Caviar prices initially dropped
on the international markets when the Soviet Union broke up.
This was due to increased production and the availability of
smuggled caviar.11 Caviar smuggling is highly lucrative
because of vast price differentials. In Azerbaijan, for example,
the average monthly wage is $8, but fishermen poach sturgeon
for caviar that can fetch up to $100 per ounce in New York and
Paris restaurants.12 The same caviar sells for $5 per pound
on the mafia-controlled black market in Baku.13

Parallels Between Caviar
and Diamonds

Parallels between the caviar
industry and diamond industry are numerous. Both are image products
catering to prestige and wealth, and both are derived from sources
concentrated in specific geographic areas.

With diamonds, 80% of the world's supply is controlled by the
South African cartel DeBeers14which has for years succeeded in keeping
the world's supply of diamonds at levels that command high prices.
Industrial diamonds, for example, often sell for a fraction of
the prices of diamonds in jewelry stores.15

Like DeBeers, Iran and the Soviet Union had created what could
be called a caviar cartel by collaborating on export quotas.
Reportedly, the newly independent nations (NIS) surrounding the
Caspian Sea along with Iran have tried on several occasions to
reach quota agreements.16However, the lack of regulatory muscle,
the poverty caused by economic havoc, and the basic unwillingness
to address the problem of poaching have defeated all serious
attempts at forming a new cartel.

Overfishing - Greater
Threat than Pollution

Unlike diamonds, however, caviar
comes from a living source which is in danger of disappearing
from the Caspian. According to the Ichthyological Committee of
the Russian Federation, Russia's official sturgeon catch was
50,000 tons at the turn of the century while the 1993 catch was
estimated at 5,700 tons.17

The sturgeon is now in danger for various reasons. Sloppy drilling
has resulted in the formation of a quarter-inch thick film of
oil on some parts of the once pristine Caspian.18 Not only does this pose serious health hazards
to the sturgeon but it also tarnishes its status.

"Caviar is an image product so we have had to work very
hard at maintaining a positive profile" says Reza Vaziri
of Caviar & Caviar. "The Iranian revolution caused considerable
damage over a decade ago. But today's marketing has to counter
images of petrochemical plants neighboring caviar processing
operations in Azerbaijan, a coat of oil covering the sea on the
coastline of Baku and industrial pollutants flowing down the
Volga River in Russia."

Overwhelming evidence would suggest that the sturgeons' main
enemy is not pollution but rather overfishing. An estimated 90%
of sturgeons are killed before they are mature enough to reproduce
and the number of sturgeons returning to the Volga River each
year has, reportedly, declined three-fold since 1991.19

Some rare species of sturgeon are already considered extinct.20No
more than 100 of the giant beluga are believed to be caught each
year, signaling a threat to this 120 million year old sturgeon
species that navigated the seas when dinosaurs roamed the land.21The
beluga can weigh as much as 1.5 tons and can live over a century.22In the
1970s it was not uncommon to find 60 year-old, 900 pound Beluga
in the Caspian.23

These days, with her spawning grounds up the Volga dammed, with
pollution and waste poisoning her path, and with rampant poaching,
the average weight of the Caspian beluga is said to be 77 pounds.24Most
are killed before even reaching maturity which usually takes
18 years.25
All factors are not necessarily working against the sturgeon.
The Caspian Sea has risen two meters since 1977 which under normal
circumstances should bode well for the sturgeon population.26

Ironically, the rise in the Caspian's water level may ultimately
help the sturgeon as it may dilute some of the pollution, and
bring greater numbers of fish as a food source to their habitat.
However, this possibility is laced with controversy. Some biologists
believe the benefits of a higher sea level will be negated by
a rise in the toxins washing from the factories' and towns' accumulated
wastes, including oil field spillage into the Caspian Sea.27

Solutions

1. A ban on poaching must be enforced vigorously
by all countries. Pressure spearheaded by the Western distributors
of caviar has finally resulted in the formation of a special
armed Interior Ministry police unit in Russia that roams the
waterways and arrests poachers and underworld processors of poached
caviar.28"We
mounted a public relations educational campaign by producing
a television commercial depicting a cartoon-like sturgeon pleading
for his life," says Vaziri who claims the project has made
a difference.

2. There has to be a serious agreement between the countries
and autonomous regions now surrounding the Caspian in regard
to fair quotas that will benefit everyone. This would revive
the cartel status of the caviar industry like the one prior to
the Soviet break-up.

3. Open sea fishing should be banned to prevent killing
young, immature fish. Sturgeon caught in the rivers while returning
to spawn contain on average 14% body weight in caviar while those
caught in the sea contain about 3%.29
Azerbaijan, Kazakhstan, and Russia need to formalize the initial
quotas regarding Russian Volga River caviar which Russia proposed
to split among the three nations.30Such action would eliminate
Azerbaijan's and Kazakhstan's need to capture the sturgeon in
the Caspian.

4. Industrial pollution flowing into the Caspian must
be reduced to a minimum. Ironically, the economic decline of
the Soviet Union has actually reduced industrial output resulting
in reduced levels of pollutants.31But a reversal of economic
fortunes would quickly change this temporary benefit.

5. Future oil drilling both onshore and offshore must
conform to the cleanest standards. Members of the Western Oil
Consortium now negotiating the Caspian oil concession with Azerbaijan,
are pledging to preserve the Caspian's environmental integrity.
According to Tom Mueller, Public Affairs Director for Amoco Caspian
Sea, the oil companies are conscious of their responsibilities,
"We are committed to minimizing the impact of our drilling
operations wherever we work. We'll carry this same commitment
to Azerbaijan."

Nasser Sagheb is a management consultant. Masoud Javadi
is a business attorney. Both are based in San Francisco.